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Economic wrongs

October 27, 2014

The various pundits who predicted inflation, or even hyperinflation, as a result of loose monetary policy since the fiscal crisis of 2008 have been spectacularly wrong. Which seems to perturb their economic notions not one iota. Discussing a 2010 open letter to the Fed, signed by variety of conservative luminaries, Jonathan Chait puts it this way: “None of the signatories have grappled with the total failure of worldview that this implies.”

According to a recent Pew poll on political polarization and media, The Economist shines as a source trusted by people across the spectrum. I agree it does a better job than many of the others named. So I’m disappointed to see it publish an article postulating that cheap human drivers will prevent the advent of autonomous vehicles:

The cost of the sensors and processors needed to pilot an autonomous vehicle is falling and is likely to fall much more as production ramps up. Yet the technology is still pricey, especially compared with a human, which, after all, is a rather efficient package of sensory and information-processing equipment. At low wages, a smartphone-enabled human driver is formidable competition for a driverless vehicle.

Unsurprisingly, this article has no numbers. So let’s imagine that the “sensors and processors” for an autonomous vehicle in production have a cost of $50,000 over a ten-year lifetime. That cost seems at least an order of magnitude too high. But let’s give the argument its best case. Not needing sleep or time off, these will operate a taxi at least 4,000 hours a year. Which works out to $1.25 per hour. Lower the cost of that package by an order of magnitude, as eventually will happen, or extend its lifetime and operation hours, and the more realistic cost is closer to a dime an hour. John Henry loses again.

This 2012 article on the many faces of Friedrich von Hayek is worth a read.

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